Tobacco companies mint profits from developing countries

31 July 2016

British American Tobacco (BAT) and PMI’s Sampoerna have posted increased profits in Indonesia and globally for the first six months of this year. Tobacco farmers complain of low prices and remain vulnerable as the manufacturers rip them off with low prices to keep costs down and profits up.

Sampoerna’s sales and revenue in Indonesia grew 8.2 percent to Rp 47.3 trillion (US$3.6 billion) in the first half of this year from Rp43.7 trillion in the same period last year. Net profits surged 21.7 percent to Rp6.1 trillion ($465million) from Rp 5 trillion. This American company is the largest tobacco company in Indonesia selling to about 35% of Indonesia’s 65 million people addicted to smoking.

Clove cigarettes is blamed as a cause of poverty in Central Java. This finding was based on a survey on poverty by the Statistics Office (BPS) of Central Java in the period of September 2015 to March 2016.

BAT’s cigarette sales increased by 3.4 percent the first half of this year especially from developing countries such as Vietnam, Indonesia and Bangladesh. However its sales decreased in Malaysia.

BAT’s global revenue, for the six months of this year (Jan – Jun 2016) was at £6,900 million ($9.1billion), was up by 7.8 percent, higher than it was for the same period last year. These earnings, also coming from developing countries, were described as “very good” by BAT’s CEO.

Meanwhile in Malaysia, due to a substantial tobacco tax increase in November last year, BAT’s volume declined 26% for the first half of 2016. BAT Malaysia has appointed a new CEO from 1 June, Hendrik Stoel, a Dutchman. He had previously been BAT Malaysia marketing director from 2010 to 2012.

Demand for tobacco has declined in Philippines, Singapore and Taiwan. Increasing tobacco tax substantially is effective in reducing tobacco use.